Good day, ladies and gentlemen, and welcome to the Barloworld Trading Update Conference Call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this call is being recorded. For participants who would be interested in the playback details, you may query this by emailing bawir@barloworld.com. Thank you. I would now like to hand the conference over to Dominic Sewela. Please go ahead. Thank you. Good afternoon, ladies and gentlemen, and welcome to Barloworld's pre-close trading update for the 11 months to 31st August 2021. I hope most of you have had an opportunity to read. I'm just going to go through high-level elements of the update. We believe that we've achieved resilient numbers, if you think about the conditions under which we're trading in all our territories. We still are operating under COVID in all our regions, and it's been very difficult in areas like Mongolia, where we've not been able to actually get and travel into Mongolia. In Southern Africa, I guess most of you would be aware that, particularly towards the end of June and July, it has been very difficult with respect to lockdowns as well as the unrest that we've seen. From a sociopolitical point of view, it has been a very difficult trading environment. Notwithstanding that, we've had a lot of things in our favor in terms of the actions taken last year are yielding good results. If you look at Equipment Southern Africa, in particular, whilst revenue in terms of machine sales, it's somewhat down, largely due to supply constraints in the main. I guess at the back of the commodity prices, that business has been very resilient. We've seen a double-digit increase in parts revenue in Equipment Southern Africa, which is pretty good. I think to that extent, the cost containment that Emmy is driving, is yielding good results, as you can see from the operating profit. I think the DRC, Emmy can delve in that a bit later. We're still in a loss-making situation, albeit improving with every month, because we did take some special charges in this region. What's also pleasing with Equipment Southern Africa numbers is that we've seen the order book actually increase since over the last two to three years. We've seen it settling at around ZAR 2.4 billion. We've actually seen it go to about ZAR 3.6 billion, which has been very good. I think we've got new orders coming out of Botswana, and Emmy can comment about that later on. Eurasia, overall, I think has been a great story. Both VT itself as well as the newly acquired Mongolia. We've seen revenue increases in that particular region, but very strong order book once again. I think ZAR 248 million order book for two regions, ZAR 177 million being VT and the balance being Mongolia. I think if you look at those results, whether you're talking operating margins, returns for this 11 months, it's been very good. I think when you move to Ingrain, I think the biggest challenge there has been the alcohol ban over the month of July. I must say, we're still trading better than expected in this business, if we look at what our forecast was. The month of July was very difficult, but notwithstanding, we continue to see a recovery, and I think we saw a better August, and then we're hoping that we will be able to have even a better September in Ingrain. The Automotive sector being mainly car rental and Avis Fleet. There, once again, all the actions taken in a very challenging environment of COVID. If there's one business that was badly impacted by COVID, it's car rental. I think if we look at the fact that we've basically had six months of last year of trading under COVID, because the first half was really pre-COVID in this business. If you look at these results for this 11 months, the business has done very well because it's still trading under COVID. You'll see that probably once we have sort of a year-on-year comparables. Notwithstanding that, we're seeing fleet utilization up to 77% compared to last year. I think in terms of operating profit, because we've taken such a huge impairment last year, and the business has recovered, and in terms of being repositioned out of the airports, and that business is holding well. The fleet, notwithstanding the fact that we've lost some of the fleet where certain fleets have not been renewed, particularly in some municipalities, the revenue has declined slightly in that business. Overall, the operating profit of that business remains well ahead of last year. This is really attributable to the cost savings and the structuring that we took last year. I think SMD is performing well, I think it's a small business that we chose to retain after we've sold the motor retail, so that I'm happy with where SMD is currently. On the logistics front, I think we had a bit of a setback, because I think we would've liked to sell this business as a whole. We've had offers, where people wanted to buy the whole business and some wanted to buy parts of the business. I think what happened, in July, we had one buyer who were far advanced, who pulled out, and basically now we are selling this business in parts, and are engaging various potential buyers. What it's going to do, it's basically going to shift the dates that we have said that we would like to have been out of this business probably by a month or two. Certainly, are hard at work in trying to sell the logistics business. I think, overall, when you look at the trading businesses, they've done very well in generating cash. This is translated in what you see in our balance sheet, where our net debt level on a comparable basis, whilst it's high, but compared to September, ZAR 2.6 billion. You have to take into account that we paid ZAR 5.3 billion for Ingrain. With the exceptional cash generation, you can actually see that we are up ZAR 1.1 billion net debt in terms of our balance. I think we'll see where we end in September. The gearing, in terms of the covenants, we're well below the target set in terms of our covenant. Our view in terms of progress on the strategy is that we're focusing and prioritizing really on the disposal side, and really on capital allocation, more than anything else. I will pause here and see if there are other questions that people could be having specifically that we can answer. I do have with me on the line, the FD, Nopasika. I do have some of the operational CEOs on the line. Let me pause, because I can't see if there are any questions. Thank you. Ladies and gentlemen, if anyone would like to ask a question, you are welcome to press star and then one on your touchtone phone or on the keypad on the screen. If you, however, wish to withdraw the question, you may press star and then two. Once again, if anyone would like to ask a question, you're welcome to press star and then one. Our first question is from Paul Steegers of Bank of America. Yeah, hello, everyone. Hope you can hear me, and thanks for the opportunity to ask questions. I had a question on your automotive car rental business. When you say profits improved by 290%, can you elaborate on the base of that number? I believe that business was loss-making last year, and as you say, Dominic, there was also an impairment. I'm just wondering what the actual swing in profitability is for that business in Rand millions, from a loss to there, roughly. That would be helpful. Thank you. Okay. Let me check if Ramasela is on the line. I can't see. I am Dominic. Okay. Go ahead. Thank you very much. Good afternoon, all. Yes, it is a swing of just under ZAR 200 million loss in the 11th month of 2020 financial year to a profit of just over ZAR 300 million. Really, the determining, if you think about the first six months or the second six months, we still had a lot of costs in the business, especially costs like employee costs that we couldn't take out until we complete our Section 189. This is the first year where we're really seeing the benefit of our cost restructuring, from facilities, all the rental expenditure that are out. On the top line, it also relates to, since we resized the fleet on time and we really did an adjustment on the rate. Those really came out handy for us. We still have a robust used car market, mainly because of the semiconductor issues that are affecting new car sales. You've got a number of factors that were either based on our plans and our restructuring that we've done last year, as well as the change in the structures that we did. The repair has increased. We're seeing the replacement market, which is your insurance market. Currently, we're trading at 86% of the 2019 level. We've managed to gain new accounts during this COVID period on the replacement market. There are a number of the top-line impacts as well as costs that really have converted the numbers. I'm talking about close to ZAR 500 million turnaround between last year, 11 months, and this year. Thank you, Dominic. Thank you. That's very helpful. May I ask opportunity for one more question, if I may be as bold? Maybe just on Ingrain, you helpfully gave some margin guidance there, but can you maybe give a little bit more quantitative color on revenue and volume momentum year to date for that business? Thank you. Charles, are you now on the line? Yes, I'm here. Thanks, Dominic. Everyone can hear me? Yeah, I think, just in terms of revenue growth, we've had quite extensive revenue growth during the current year, in the order of probably 20% from a revenue perspective. From a volume perspective, we're seeing around about 10% in terms of the volume growth up to the end of August from that perspective. That's driven largely by the recoveries in the alcoholic beverage sector. Reasonably strong ongoing performance in coffee creamers and paper converting. A little bit of negative play in the paper making sector, confectionery, and the canning sector to some extent. From an overall margin perspective, obviously that flows through to the margins. We've seen an improvement in overall margins. As we signaled in our guidance, not quite at the same levels as the first half, and a number of reasons for that. The second half is slightly lower from a volume perspective. We've obviously seen the bigger impact of lockdowns in the second half, and also the civil unrest in July. From a winter tariffs point of view, it's slightly higher during the second half of the year. I think that's really where we're sitting at the moment. Probably the last point I've got at this stage as well is that it's really important, as we present our results from an ongoing perspective, to focus on the EBITDA numbers when looking at the comparatives against the prior year because of the big impact of what the purchase price allocation will be against the comparatives. Thank you. Thank you. Our next question is from Mark ter Mors of SBG Securities. Yeah. Good afternoon, everyone, and thanks Dominic and team for the presentation. Just a question on the Southern African equipment. It looks like the second half profitability has been really exceptional, despite the fact that the top line was still quite constrained. Can you perhaps talk about the mix of business that impacted the margin? Are some of the supply chain constraints and port hindrances, are they clearing up going into the next financial year? Yeah. Let me see if Emmy is on the line. Yes, I am on the line. Thank you. Okay, go ahead. Yeah. Just to give a view in terms of the top line, as we've indicated, about a 2% growth. Second half has been quite strong, and particularly both from the machine sales, but also, as we've indicated, in terms of the focus on the aftermarket, particularly on the parts side, a double-digit growth. We've seen it actually coming through in the second half. Given the fact that we indicated the strong mix in terms of the aftermarket, which actually helped us as well with regards to the operating profit margin. The guidance still based on what we've achieved in terms of the mix for the interim period. We foresee the similar type of mix. Talking of the logistic constraint, not necessarily from a South Africa point of view, we've indicated that overall, we have seen some challenges in terms of the overall global supply chain. We are starting to see the clearing at the ports and then also good deliveries in terms of most of the machines as well as the parts that are planned for the period going forward. We are not where we're supposed to be with all the bunching that we've seen at the ports. In terms of what we are seeing in terms of the estimated delivery times, there's been some level of improvement. I hope I've answered your question. Thank you. Thank you. Our next question is from Cobus Cilliers of All Weather Capital. Hi, everyone. Thank you for taking the question. I just want to find out, in the trading statement, you specifically mentioned congestion at the ports and difficulty in getting the goods cleared. I just want to find out playing out currently, and are you finding it difficult to get stock in for the equipment sales? Thanks. Emmy, you can still take that one. Yeah. As we've indicated with the riots that we had earlier on, but also that had an impact. As I've indicated now that we are starting to see significant improvement in terms of clearing at the port. I've also indicated that we've been dealing with a lot of demurrage and delays in terms of some of the machines, but most of them have been cleared, most of the machines have been delivered. I'm quite comfortable in terms of where we are in terms of the clearing at the ports. Thank you. Our next question is from Rowan Goeller of Chronux Research. Thank you very much for your time, Dominic and team. I've got two questions. The first one's return on equity. Dominic, you've been working quite hard on this. I think now that the way you measure it, and the good work that's been done with your capital in particular, return on equity should start to improve possibly by the end of this year. As we flow into 2022, we should see a nice improvement. Can you just comment on the progress on there, please? I've got a second question, but I'll ask it afterwards. Hi, Rowan. I think there is progress. One of the major constraining issue on return on equity, it's basically that we do sit with a lot of cash in our operations currently, and less debt. One of the key issues for us, it is to see how we can ensure that we continue to distribute the capital back to the shareholders. As I did indicate in the first half, that is going to be the focus. As we basically sell some of the businesses, like the automotive legs of it, and we did mention that the core businesses are going to be very cash generative. I think then we will begin to see our ROE improve. Probably my sense, obviously, you do not have to hold me to this, is that by 2023, we should be way above the hurdles that we are setting ourselves, of above 15%. It will take several actions that are no longer just about, because we have disposed the operation. We have to address things like the pension fund in the U.K., and the various options that we're looking at there. Whether one does special divs or buybacks, it will be something of that nature that we'll be having to look at to address the element on the equity side. Okay. Thank you. My next question is on the disposals process. It's been a little bit stop-start, and I'd like to know if you have any specific criteria for potential purchasers of your businesses. Is it the highest bidder wins, or are you applying, for example, Black Empowerment credentials or requirements on companies looking to purchase some of your businesses? This kind of leads into, if you can't sell logistics as a whole, but you're selling it piecemeal, that may be one explanation why you are maybe struggling to sell your businesses in a large bit, as opposed to having to break up and sell it in pieces. Yeah. You have to understand, buying and selling businesses, you go through the same process in a way. Where once you start the process, you open up to potential buyers. People want to open up the hood, and some of them may not necessarily be genuine. You've got to go through various gates in determining whether people are serious. They make you an unbinding offer. We go to the next stage, where they make a binding offer. Like I said, I think we had one offer. What happened to them in terms of their business, in July, with the unrest, they pulled out of the transaction. These other buyers that you know are now looking at piecemeals, we're just progressing things with them. We're not using a BEE criteria at all. Here, we're purely looking at somebody who would offer us something that makes sense for us, commission. Basically, the person who's able to actually execute in terms of being able to raise capital. We don't think there's going to be statutory hurdles. That person is the person who would emerge a winner in this process. Thank you. Our next question is from Ross Krige of JP Morgan. Good afternoon. Thanks for the call, guys. Just wanted to check if you have any comments on the contribution from NMI-DSM in the second half, whether that's profit or trading momentum. Then just on automotive, can you just clarify, did you say around ZAR 300 million operating profit in that segment for the 11 months? That would imply quite a big sequential improvement in H2. Yeah. Ramasela, do you just want to clarify that point. I presume you're talking at an operating level in terms of your swing. Do you just want to clarify, maybe just give people a base, just remind people where we were, probably not even 11 months, in September, so that they can work out that Ramasela. Then I'll come back to the other question. Thank you very much. The operating profit line, the trading line that's what we're referring to when we spoke about the swing of 289%. That's really coming from activities that we had. As I've indicated, that we're sitting at ZAR 166 million loss, 11 months to August 2020. That has now swinged by almost ZAR 500 million, to be exact, about ZAR 481 million. That's where we now currently sitting. Really, the driver into that, it's not just one line. The biggest driver is our cost saving through the restructuring process. That restructuring process, both from facility, our network, people, as you know, to comply with the legislation, we needed to do longer consultation process to make sure that we comply. You really took out most of the cost towards the end of that financial year. We started the new financial year on a proper base for the company from both the fleet as well as network and people. That really worked in our favor with regard to the cost containment. Even when we started seeing some pickup, we didn't increase the cost. Our network structure is still the same from facility point of view, similar to employee level. From a top-line point of view, there are a number of things that we did. I think during our interim, we did indicate that we really went aggressive on our subscription product, which in the second half of this financial year, meaning the five months from April to now, we really stabilized from a pricing point of view, from benefit point of view. Our subscription product then had a good take-up. I think when we talked in the first six months, people were still not understanding the subscription product. We saw a lot of stabilization. We did number of strategic partnerships in that product. Similar with the insurance. Our top line improved because of our partnership with the insurance industry, and we're seeing more and more cars on the road that really seeing a pickup in the insurance industry, and by virtue of it, then it means more accidents, means more certified, and more replacement settlement. We saw a real improvement in that. We can't discount the fact that used cars have been very robust as well. We remain very strong. The margins still double -digits at over 20% compared to previous year, where it was still strong, but not as strong as this. The cut of production from the OEM really contribute as well. It is hitting us on the number of vehicles that we're getting. It still keeps the used car market to be robust. That's where we still continue to see the biggest improvement in our business. As much as we had two lockdowns that really hit us in this financial year, the December strike really felt the pain in February, as well as the June, July unrest that Dominic spoke about. We didn't operate, at least for a week in that period in KwaZulu-Natal and part of Gauteng. Those lockdowns did impact us. I think where we've been sitting with just reduced costs, we're able to really protect ourselves from a lot of challenges that may come with lockdowns. I think after the third lockdown, we know how to then operate with this lockdown and the third wave, that we continuously prepare ourselves and do forecast of when is the next wave and how we're going to act to make sure that we do not suffer as we did with the first and the second. It's a continuous improvement of sharpening, of selling when you need to sell. It's all about acting right at the right time. You dispose when you need to dispose, you acquire when you need to acquire, and you put the price right. I think if you look at the industry as a whole, the rates today that is on the market now, I can't even compare to 2016 or 2020. It's just not been seen. We believe that is a sustainable rate for the industry going forward. Thanks, Dominic. Thanks, Ramasela. Ross, I think in terms of the NMI has done very well for the 11 months. Just to break it out, we would have sold motor retail into NMI. Those numbers reflect three months of including motor retail. The other thing that I'd like to highlight is the fact that, in paying us or buying the business, NMI had to go and raise debt to finance this business. The interest charges to NMI have risen, but notwithstanding that, the numbers were still very positive compared to March. Yeah, it's a good set of results. I think if I look at the impact of the strike, out of all Barloworld businesses, NMI-DSM joint venture was heavily impacted, particularly in Pietermaritzburg, both on the truck side as well as Ford in motor dealership, where there's been some damages to the property. That was one business that I would say has been impacted by that. Notwithstanding, still the guys have been able to deliver a decent result. Perfect. Thanks, Dominic. Thanks, Ramasela. Thank you. Our next question is from Nhlakanipho Mncwabe of 36ONE Asset Management. Hello, hope you can hear me. Thanks for the call. I just have a quick question on supply chain. Emmy's spoken much about it, but if you could just give a general comment on, and also include sort of the Eurasia business on, just given the shortages of containers and the backlogs, et cetera. How are you guys experiencing sort of the access to parts and equipment in all your businesses, all your equipment businesses, that is? I guess I'm going to just get Quinton to comment on Mongolia. Emmy has already covered. One of the key issues is that, having Cat warehouse here has helped quite a bit because most of the supply into Africa goes into a Cat environment, and then they get to supply to us. Where Emmy was talking about was mainly on whole goods, where, for instance, things like Cat 426, which is a product manufactured out of India and other products that are manufactured from other whole goods we've seen an impact in Southern Africa. Let's hear from Quinton, to hear from his side whether, has he been experiencing similar things from Mongolia and Vostochnaya Technica. Quinton? Thank you, Dom, good afternoon, everyone. I think from a Russian perspective, we haven't experienced a negative impact, largely due to the reason that Dom has just mentioned from a parts perspective as the warehouses within the Russian boundaries. Not a big impact from that perspective. From a product perspective, we haven't experienced any problems in terms of importing. What we have experienced is just a supply chain with lead times getting a little bit longer as demand has ramped up throughout the Cat dealer network. I think the situation is slightly different from a Mongolian perspective, where it's a landlocked country and some of the containers were on the Chinese border, and that has impacted deliveries in this financial year. We will see it in the results as well. With saying that, it is still meeting our expectations, exceeding our expectations, the Mongolian results. They did face a lot of challenges from COVID and also the supply chain, specifically on the Chinese border. I hope that answers the question. Yes, thank you very much. Okay, thanks. No, thanks. Thank you very much. Our next question is from James Twyman of Prescient Securities. Yes. Hi there, thank you very much. I've got two questions. The first one is, on the logistics business, there seems to be invested capital at ZAR 1.9 billion there. What sort of proportion of that do you think is feasible to get back out of that business, just in terms of how much of that is a real asset that can be liberated, given that the business itself is loss-making. Secondly, on the other loss-makers, Bartrac, could you just talk around excluding all these one-offs? Are we back to breakeven on a monthly basis now, or how close are we to that, would you say? Also relating to that, are you seeing sort of improving orders on that side of the business? Thank you. Okay. Thanks, James. James, I appreciate I'm in the middle of a sales process. I'm not going to comment to numbers of the logistics. It is safe to say we are selling the entire business, but in piecemeal. All right. I'm going to ask Emmy to just respond to Bartrac. Yeah. Thanks, Dom. With regards to the Bartrac, as we've indicated that we had quite a number of one-offs that in terms of the write-offs, particularly also looking at some of the provisions that we've included. What is positive, though, is to look at what is happening on the ground, particularly with regards to our turnaround strategy. We have seen Bartrac, as of July, August, being profitable. However, the losses have been so significant towards the end of this year. We're looking forward to 2022, whereby Bartrac will start being profitable. Thank you. Great. Thank you very much. Thank you. Ladies and gentlemen, one final reminder. If anyone else would like to ask a question, you are welcome to press star and then one on your touch-tone phone or on the keypad on your screen. If anyone would like to ask a question, you are welcome to press star and then one. We have another question from Hayden Smith of Investec Bank. Hayden, we cannot hear you. Please make sure your line is not muted. Sorry about that. My line was muted. I joined a little late. Apologies if the question has been asked, but I'd just like to get some color on input cost pressures that you're starting to see on the yellow metal side, given what steel prices have done and so forth. Secondly, if you are seeing substantial pressures on that front, do you feel that your various geographies are strong enough in terms of order books to fully pass that through? Thank you. Thanks. Quinton, Emmy, do you guys have pricing increases on a yearly basis with Caterpillar? Do you want to comment specifically on what Hayden was asking in terms of steel prices? Thanks, Dom. I will answer it. We've definitely seen price increases. Caterpillar, in fact, has announced price increases now, and they are also considering price increases in 2022. In saying that, they have given us price protection in terms of our order book. There is various mechanisms which we will be using to make use of this price protection. I don't see a big risk on the order book. Also, all other manufacturers are sitting in the same boat, which brings us back on a level footing. Commodity prices, our product is going to miners, most of our product. Commodity prices remain strong and stable, and the miners are capitalizing on these prices as well. Yes, the price increases are coming through. We do have some protection, and we've also built in protection on our contracts. Our customers are also benefiting from the higher commodity prices. At this point in time, we haven't experienced any undue pressures from a pricing perspective. Thanks, Hayden. I hope you answered. Thanks, gentlemen. Thank you. Ladies and gentlemen, one final reminder. If anyone else would like to ask a question, you're welcome to press star and then one. It seems we have no further questions on the line, I would like to hand back to Dominic for closing comments. Thank you very much. Thanks everybody for attending. I know that some of you will be seeing tomorrow on one-on-ones and, yeah. As you could see, we are towards the tail end. We'll try and ensure that we answer your question just quick close. If you have any more questions, just send them to Madisha and we'll try and have a quick turnaround. Thanks all for attending. Have a lovely afternoon. Cheers. Thank you. Ladies and gentlemen, once again, if you would like to get the information for the playback, you're welcome to email bawir@barloworld.com for any information. That concludes this conference. Thank you for joining us. You may now disconnect your lines.